COVID-19 – How it will Change the Way People Buy Homes
The coronavirus pandemic has changed how business is conducted in nearly every sector, and real estate is certainly no exception. People will always need a place to live, but what kind of homes they look for—and how they conduct their search—is likely to be very different in the coming months than it has been in the past.
The spring season is often a busy time for home purchases but that has not been the case in 2020. Mandated shut-downs have slowed home sales significantly compared to past years. While this isn’t necessarily an indication of how the industry will be moving forward, it is important to stay abreast of these changes as a seller. Let’s look at some of the ways the housing market will likely be affected moving forward.
Cleanliness is key. A spotless home always has more eye appeal than one riddled with clutter. Having said that, today’s buyers are looking at cleanliness as a safety measure, not just an aesthetic consideration. Maintaining a sanitary environment for showings is crucial for those selling homes in the coming months.
Virtual tours will continue to be popular. Many states have re-opened to allow in-person showings, but that doesn’t mean all buyers will be comfortable doing so. Showings are limited, as well, with open houses cancelled and tours conducted by appointment only. There is also no way to predict how these regulations will change in the future. Preparing virtual tours for properties is a smart choice moving forward to accommodate all eventualities.
Luxury additions will be less of a draw. The United States looks poised to enter a recession given the current unemployment rates and the number of businesses struggling to keep their doors open. Luxury upgrades like smart home theaters and spa bathrooms that could have added to a home’s value this time last year are likely to be less in demand, as more buyers shift to a frugality mindset.
Prepare for digital contract negotiations. There are a variety of e-signing and teleconferencing programs available that allow you to avoid having everyone meet face-to-face in an office. Being familiar with this technology will be a significant advantage as you prepare for closings.
Mortgage rates have dropped, but loans are more difficult to obtain. At the end of April, the average fixed rate for a 30-year mortgage was at 3.23%, compared to the 4.14% average in April 2019. This is the lowest rates have been since the 1970’s, and it may fall even lower as the situation evolves. Having said that, not all buyers will be able to access these low rates, especially those currently facing employment insecurity. Availability of credit is about 16% lower than it was a year ago according to Freddie Mac. Expect a corresponding increase in the expected down payment amount, required credit scores, or associated fees as mortgage lenders aim to diminish their risk.
Regulations and restrictions are changing rapidly. Policymakers are doing what they can to limit the impact of the pandemic on their areas. Stay up to date on the most recent developments so you can continue to adapt to these shifts. This also allows you to be a resource for buyers, who will have questions and concerns in the wake of these shifts. Positioning yourself as an expert can help set buyers at ease and make you a person they want to work with.
Post by Karl Kennedy